IPO made easier-ASBA, SCSBs & IPO -PART I


In India, IPOs( Initial Public Offering) previously used to be company friendly in the sense the investors are at receiving end in the following matters:

  1. Institutional investors and retail investors have certain % of quota on the company’s shares in respect of IPO as per SEBI order. The closing date and time for both categories are the same. So retail investors are at sea to know what is the extent of subscription to the IPO offer unless and until all Institutional investors complete their payment before closure time and date. But most of the institutional investors wait till last minute to subscribe to the issue thus making the retail investors to guess whether the IPO will be successful or failure and % of subscription. This created tension for retail applicants whether to subscribe or not to any IPO issue where subscription picture is not clear. In this tension, many times retail investors missed the IPO or erroneously subscribed to IPO which is a failure due to last minute non-interest shown by Institutional investors.
  2. Money has to be paid in advance in full before allotment in olden days. The company to whom money was remitted benefited by using the money for nearly one month to 2 month without interest. After allotment, the balance money was returned based on allotment. Thus investors had to lose bank interest for the said period and IPO company was benefited by free use of money invested for process period fully.

In order to remove the above problems, SEBI announced the plan/ schemes.

  1. SEBI is likely to bring at any time rule fixing the time limit for retail and institutional investors. The closure period of bidding will be earlier for institutional investors than retail investors. This will help retail investors to gauge the subscription % and guage listing price with some base so that they will not lose money when listed.
  2. For removing the other problem, SEBI enforced ASBA facility for investors.

ASBA facility: (Applications supported by Blocked Amount) :
This facility approved by SEBI came into operation from 1.5.2010.This facility can be used by the applicant from the bank only when he is having account there.
a) It is an application containing an authorization to block the application money in the approved bank account. If an investor opts for ASBA, his application money will be debited from the bank account to the extent of allotted qty from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized .

b)Approved banks are those banks which has the approval of SEBI as SCSB(Self Certified Syndicate Banks).

The list of SCSB banks as on Sep 2010 are as follows:

Sl. No. Name of the bank ***see below Date of receipt of self certification Date of inclusion as SCSB

  1. Axis Bank Ltd December 23, 2009 January 1, 2010
  2. State Bank of Hyderabad December 24, 2009 January 1, 2010
  3. Corporation Bank December 24, 2009 January 1, 2010
  4. State Bank of Travencore December 24, 2009 January 1, 2010
  5. IDBI Bank Ltd. December 24, 2009 January 1, 2010
  6. State Bank of Bikaner and Jaipur December 24, 2009 January 1, 2010
  7. YES Bank Ltd. December 24, 2009 January 1, 2010
  8. Punjab National Bank December 24, 2009 January 1, 2010
  9. Deutsche Bank December 24, 2009 January 1, 2010
  10. Union Bank of India December 31, 2009 January 1, 2010
  11. HDFC Bank Ltd. December 31, 2009 January 1, 2010
  12. Bank of Baroda December 31, 2009 January 1, 2010
  13. ICICI Bank Ltd December 31, 2009 January 1, 2010
  14. Vijaya Bank December 31, 2009 January 1, 2010
  15. Bank of Maharashtra December 31, 2009 January 1, 2010
  16. State Bank of India December 31, 2009 January 1, 2010
  17. Andhra Bank January 4, 2010 January 15, 2010
  18. HSBC Ltd. January 4, 2010 January 15, 2010
  19. Kotak Mahindra Bank Ltd. January 7, 2010 January 15, 2010
  20. Bank of India January 12, 2010 January 15, 2010
  21. CITI Bank January 14, 2010 January 15, 2010
  22. IndusInd Bank January 15, 2010 January 15, 2010
  23. Allahabad Bank February 9, 2010 February 15, 2010
  24. Karur Vysya Bank Ltd. February 22, 2010 March 1, 2010
  25. The Federal Bank February 24, 2010 March 1, 2010
  26. Indian Bank March 12, 2010 March 15, 2010
  27. Central Bank of India April 6, 2010 April 15, 2010
  28. Oriental Bank of Commerce April 16, 2010 May 3, 2010
  29. Standard Chartered Bank April 16, 2010 May 3, 2010
  30. J P Morgan Chase Bank, N.A. May 26, 2010 June I, 2010
  31. Nutan Nagarik Sahakari Bank Ltd. July 1, 2010 July 15, 2010
  32. UCO Bank July 12, 2010 July 15, 2010
  33. Canara Bank August 12, 2010 August 15, 2010

*** Specified branches of banks.
Note: List of Self Certified Syndicate Banks (SCSBs) and their designed branches i.e. branches where ASBA application forms can be submitted is available on the websites of BSE and NSE and on the website of SEBI.
Applicant can make maximum five applications in a bank per issue and he should have bank account in the said SCSB.

According to SEBI, in the new IPO process, the SCSBs can accept the application/applications of IPO bidding of the bidders and can block the equivalent bidding amount of the bidder in his account. The banks upload the details in the electronic system of BSE/NSE. After completing this process and verification of the application, the ASAB bidder would be considered as successful bidder. After declaration of IPO result, if the bidder succeeds to get the equity share, the frozen money would be transferred to the bidding company’s account. If the bidder is not allotted any shares, then the freezed money would immediately be released to the applicant bank account from freeze.

This facility is not only applicable for IPO but also for right issues (in full ).

C. R. Venkata Ramani

(AICWA)

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8 thoughts on “IPO made easier-ASBA, SCSBs & IPO -PART I

  1. Dear Sir,

    Here in mention list of ASBA Banks is only 33, but now there is total 37 banks.

    If the 4 more banks added in ASBA Bank list, Kindly provided the list of all 37 bank or only 4 new banks to me.

    Thanks & Regards
    Vivek Pathak

  2. IT IS THAT AT CANARA BANK HYDERABAD NO ONE HAS ANY IDEA ABOUT ASAB, IT SEEMS THAT CANARA BANK IS NOT OPERATING ASAB AT HYDERABAD

    1. I think you can check with website of canara bank about this or inform the officers of canara bank to check with their HO and inform you about this. Only selected branches of canara bank are giving this facility.

    2. Sir,

      This was a very informative article. I had a question. If the SCSB mistakenly provides a one digit of the PAN number erroneously in the online bidding, how can it be corrected?

      Thank you again

  3. ASBA implementaion among banks is very poor. Most of the people at the designated branches have no idea what ASBA is in the first place. Most common heard refrain is “they put our branch on the website or so and without giving any information to us regarding what should be done or so”..
    SEBI should look into this.

  4. Refer my previous article on ASBA(Applications supported by Blocked Amount) for IPOs, This ASBA is not much successful and covers only 15% of total IPO subscription due to absence of incentives to capital market intermediaries. In order to make it more attractive, now SEBI is reworking new norms to see banks and brokers sharing the commission, a long-standing demand of the latter. The sharing formula may be 50:50 or 25:75. Anytime the new norms will be out from SEBI

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